A positive deviant is someone who succeeds when all about them are failing, a person who finds a way out when everyone else is stuck. The purpose of studying these deviations from the norm is to learn from the strategies of the positive deviants to see if others can adopt them and get similar results.

I recently was selected as a Center for Financial Inclusion Fellow to study positive deviance in the banking industry. Let me explain the context where I will be searching and what I will be looking for.

In countries around the world, governments provide regular cash payments to those living below the poverty line. Sometimes these payments come with conditions, like keeping the children in school and receiving regular medical check-ups. Sometimes they come as part of a public works project. And sometimes they have no conditions at all. Scientific studies have shown that these regular payments, even when very small in amount ($20 – 50 per quarter), have a positive impact on helping people move out of poverty. Regular payments that can be depended on form a base that families can build on. In addition, these payments help stop the generational transfer of poverty. Parents receiving these payments can afford to send their children to school, so the children end up having better job opportunities than their parents did.

Years ago, governments made these payments in cash. That’s right, a big truck loaded with cash would pull up to a local government office and drop off a bundle of bills. Local officials would distribute this cash to those on the government social welfare rolls. As you can imagine, much of this money never made it to the right people. Today governments use a quicker and less leaky method. They set up bank accounts for each person and deposit the money directly in their account. Now, in most cases, these accounts serve the function of a mailbox for those receiving the payments. As soon as the money comes in, its owner will go to the bank or an ATM and take it all out.

Why don’t they keep any in the bank? People living in poverty have a lot of experience dealing with cash, even when they have very little of it. On the other hand, they have no experience managing bank accounts. Research by Guy Stuart of Microfinance Opportunities, and a CFI Fellow last year, found that the people receiving these payments:

Don’t trust the banks – Why should they leave their money with rich people they don’t know when they can keep it at home?

Don’t know about other products and services the banks have that might be useful to them.

Don’t see any benefit to leaving money in their account – especially when getting the money out requires a long walk to a bank branch or ATM.

My research will look at the supply side of this challenge. I can make a business case for why banks should invest in this customer base as part of a long-term strategy for building profits. It goes like this:

Banks accounts tend to be very sticky. (I had a colleague in the UK who told me of a study that found that people changed spouses more frequently than their checking accounts.)

Governments provide social payments to large numbers of people.

Banks that provide products and serve these clients well will earn their loyalty.

Over time, many of these people will move out of poverty and have accounts with larger balances.

This gives the banks that offer these accounts a chance to acquire large numbers of customers long before their competitors become interested.

Unfortunately, most banks do not see it this way. Since the money does not stay in the bank very long, they don’t see a way to make money on these accounts. They will set them up if the government will pay the cost of operating them, but they don’t want to invest any of their resources into this customer base. This means that they don’t offer the types of products that will meet the needs of these customer and they don’t take the time to help their customers learn how to use their accounts.

So, I am on my search for positive deviants, looking for banks that go against the grain and see these customers as part of their strategy for generating profits over the long term. The key criteria for a bank to qualify as a positive deviant in this area are:

Actively pursue clients receiving social welfare payments from the government.

Develop products designed for the needs and aspiration of these clients.

Help their clients learn how to make the best use of these products.

Show results in clients using more banking services over time.

I recently participated in a webinar with CFI describing my research. You can see it below:

So far, my desk research has led me to the following financial institution that may meet these criteria:

BANSEFI, Mexico – The National Bank for Savings and Financial Services is a state-owned bank created to provide savings accounts for people living in poverty. All of the governments social welfare payments (Prospera) flow through this bank. BANSEFI has worked with Women’s World Banking to develop tools for clients to learn about how to use the various products that BANSEFI offers.

AgroAmigo, Brazil – Part of the Banco do Nordeste, a state-owned bank in Brazil, AgroAmigo provides loans to those who participate in Brazil’s Bolsa Familia program. Loan officers also serve as agricultural extension agents, helping borrowers determine the plants to grow and the markets for their harvest.

ICICI Bank, India – The government of India recently set up over 300 million accounts to receive social welfare payments through its PMJDY scheme. ICICI is one of the top four banks in India and one of the few private banks to provide accounts for PMJDY recipients.

Equity Bank, Kenya – One of the largest private banks in Kenya, Equity provides banks accounts and a network of banking agents in the arid northeast of Kenya for people receiving payments from the government’s Hunger Safety Net program.

I’m also interested to see if any of you who read this have some ideas of banks that might qualify. If you’ve run across any positive deviants lately, can you please let me know? You can use the comments section below or email me directly at larry@souloffinance.com.